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PHILADELPHIA FED RELEASES FIRST QUARTER 1993 SURVEY OF PROFESSIONAL FORECASTERS

 Short-Term Outlook Improves; Fiscal Stimulus Seen for '93
 PHILADELPHIA, March 1 /PRNewswire/ -- Current prospects for economic


growth in 1993 look brighter now than they did just three months ago, according to 34 forecasters surveyed by the Federal Reserve Bank of Philadelphia.
 The forecasters now see the economy expanding at a 3.1 percent rate in 1993, up from 2.6 percent in the last survey, and continuing to expand at that rate in 1994. The civilian unemployment rate is seen averaging 7.0 percent in 1993, unchanged from the last survey, but dropping in 1994 to an average level of 6.6 percent.
 Higher growth in 1993 will not come at the expense of higher inflation, according to the forecasters. For 1993, they continue to see inflation averaging 3.2 percent as measured by the CPI, and rising slightly to 3.4 percent in 1994.
 Prospects for interest rates are not quite as bright, however. Forecasters see rates bottoming-out over the first half of 1993 but rising thereafter. Three-month Treasury bill rates are forecast to increase by 0.7 percentage points from mid-year 1993 to the first quarter of 1994.
 The following table compares median forecasts for selected variables from the current survey with those from three months ago:
 3-month
 Real GDP CPI Inflation T-Bill Rate
 Previous New Previous New Previous New
 Quarterly data:
 1993: Q1 2.4 3.0 3.1 3.0 3.0 3.0
 Q2 2.8 2.9 3.2 3.1 3.2 3.0
 Q3 3.3 3.3 3.3 3.3 3.3 3.2
 Q4 3.3 3.4 3.4 3.2 3.5 3.5
 1994: Q1 NA 2.9 NA 3.3 NA 3.7
 Annual average
 data:
 1993 2.6 3.1 3.2 3.2 3.3 3.2
 1994 NA 3.1 NA 3.4 NA 3.7
 On the fiscal policy front, the forecasts reflect a mild stimulus package in 1993 associated with President Clinton's economic program. Opinion on deficit reduction, however, is less clear-cut.
 Forecasters See Lower Long-Term Returns to Stocks and Bonds
 The forecasters have lowered their projections for average returns on stocks (S&P 500) and short- and long-term government securities over the next 10 years. As the accompanying table shows, the return to equities and three-month Treasury bills is expected to average one percentage point less than forecasters thought at this time last year.
 LONG-TERM (10-YEAR) FORECASTS (pct.)
 92Q1 Survey 93Q1 Survey
 Stock Returns (S&P 500) 10.0 9.0
 Bond Returns (10-yr T-bonds) 7.5 7.0
 Bill Returns (3-mo T-bills) 5.0 4.1
 Long-Term Inflation Expectations Continue to Fall
 The forecasters continue to revise downward their inflation expectations (based on the Consumer Price Index). Inflation is currently projected to average 3.5 percent over the next 10 years, down from 3.6 percent in last quarter's survey. This marks the third consecutive survey in which the forecasts have been revised downward.
 Minimal Risk of a Negative Quarter
 The probability of a decline in real GDP over the next two quarters is substantially lower than forecasters thought three months ago. Currently, the see only a 3 percent chance of a decline in the first quarter followed by 6 percent in the second quarter, both down from 11 percent in the last survey.
 The Philadelphia Fed's Survey of Professional Forecasters was formerly conducted by the American Statistical Association (ASA) and the National Bureau of Economic Research (NBER) and was known as the ASA/NBER survey. The survey, which began in 1968, is conducted each quarter. The Federal Reserve Bank of Philadelphia, in cooperation with the NBER, assumed responsibility for the survey in June 1990.
 For further information about the Survey of Professional Forecasters, contact Dean Croushore, Research Officer and Economist, Federal Reserve Bank of Philadelphia, Ten Independence Mall, Philadelphia, Pa., 19106, 215-574-3809.
 SURVEY OF PROFESSIONAL FORECASTERS
 MAJOR MACROECONOMIC INDICATORS, 1993-94
 Forecast Annual
 1993 1994 Average
 Q1 Q2 Q3 Q4 Q1 1993 1994
 Percent Growth at
 Annual Rates
 1. Real GDP (Billions
 of 1987 Dollars) 3.0 2.9 3.3 3.4 2.9 3.1 3.1
 2. GDP Implicit Price
 Deflator
 (1987 equals 100) 2.8 2.5 2.9 3.0 2.7 2.8 NA
 3. Gross Domestic
 Product (GDP)
 ($ Billions) 5.7 5.8 6.2 6.0 5.6 5.7 6.2
 4. Consumer Price
 Index (CPI-U)
 (Annual Rate) 3.0 3.1 3.3 3.2 3.3 3.2 3.4
 Variables in Levels
 5. Unemployment Rate
 (pct.) 7.2 7.0 6.9 6.8 6.7 7.0 6.6
 6. 3-Month Treasury
 Bill Rate (pct.) 3.0 3.0 3.2 3.5 3.7 3.2 3.7
 7. 10-Year Treasury
 Bond Yield (pct.) 6.5 6.6 6.6 6.7 6.8 6.6 7.0
 Source: Research Department, Federal Reserve Bank of Philadelphia, Survey of Professional Forecasters, First Quarter 1993.
 Notes:
 The figures on each line are medians of 34 individual forecasts.
 NA equals Not Applicable.
 For the GDP Implicit Price Deflator and Consumer Price Index, the annual average is the percent change in the fourth quarter index level from the fourth quarter index level of the previous year.
 /delval/
 -0- 3/1/93
 /CONTACT: Dean Croushore, research officer and economist of the Federal Reserve Bank of Philadelphia, 215-574-3809/


CO: Federal Reserve Bank of Philadelphia ST: Pennsylvania IN: FIN SU: ECO

MK-CC -- PH010 -- 1436 03/01/93 12:59 EST
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